Present At The Creation

Few companies operating in Canada today pre-date the founding of the country. The Gore Mutual Insurance Company, headquartered in Cambridge, Ont., not only pre-dates Confederation by nearly three decades, but is woven into the historical fabric of the country and the insurance industry.

Gore Mutual will be 175 years old next year. The company has survived military rebellion, economic turbulence, the political reshaping of the country and two world wars. Significantly, it persevered through its first 30 years of existence at a time when mutuals were cash poor and a single fire claim could bankrupt them.

“Fundamentally, you have to ask the question, how is it that this company has been able to survive through all the adversity it would face over 175 years?” says Kevin McNeil, current president and CEO of Gore Mutual.

Many of the answers lie in a massive fireproof vault in the basement of Gore’s Depression-era headquarters.

“The vault is like something out of a James Bond movie,” says historical branding consultant and corporate historian Dr. Ulrich Frisse, who has spent more than 200 hours itemizing and analyzing its contents. “There is a big, black door with a big dial on it. You have to turn the dial with both hands and to open it requires all your force because it’s such a heavy fireproof door.”

Inside, the walls are lined with huge, old insurance ledgers, hand-written board minutes in leather-bound books dating back to 1837, original insurance policy documents, photographs and even letters from Canada’s two wartime prime ministers. They tell the story of a company that leveraged key events in Canada’s history—and of founding members who took a careful and conservative approach to business, allowing them to persevere where others perished.

“One of the things that is most striking is the strategic approach taken by the founders from the very beginning,” says Frisse. “We see evidence, even in the early 1800s, of customer segmentation, risk management and risk assessment, things we often think of as a modern approach to insurance. These are all best practices that are central to the company’s longevity and that are still relevant today.”

The Mutual Frontier

In 1836 the Province of Upper Canada passed an act allowing for the creation of mutual insurance companies, based on a model developed in England in the seventeenth century, to protect against fire losses.

“This was very much a pioneering community,” explains Frisse, but one that was developing. “People were moving into town centres, opening businesses, tanneries, mills. Business people from Brantford, Hamilton and a number of different communities came together to discuss the formation of The Gore District Mutual Fire Insurance Company.”

The 1837 rebellion initially halted them in their tracks. But two years later, on June 18, 1839, they reconvened at the Brantford schoolhouse with additional participants. The secretary appealed, “Men of Gore! Be United, keep your money at home and help one another!” By the end of the meeting they had 43 individuals—three more than required by the legislation—that agreed, on paper, to pay a share of damages if any one member suffered a loss due to fire, and officially established the company.

“They didn’t have a lot of start-up capital. But they didn’t need it,” says Frisse. “These were not cash mutuals. They didn’t pay premiums up front or pool money in the bank. Everything was done retroactively.”

The lack of liquidity made the industry volatile. Dozens of mutual firms launched at the same time as Gore, but many didn’t survive a year.

“What Gore did is they made sure they were not insuring too many properties in the same neighbourhood,” explains Frisse. “This was quite against the norm of the day, where a problem that a lot of companies ran into was that they were too localized. They’d get one fire, and the whole neighbourhood would go up in flames and the company would go out of business.”

The Business Mindset

Gore’s early owners realized that they needed a reliable management model.

“The values on which we were founded—mutual benefit and support of safe communities—are timeless and universal values,” says McNeil. “But [the founders] also said ‘We need to run our business like a business. It needs to be profitable and have a strong balance sheet.’ ”

To this end, in 1854, Gore developed a risk assessment system, and issued instructions to its agents, along with a catalogue for assessment that placed properties into 22 different risk categories.

“It was the first time that, if a property was higher risk, you would be on the books to pay extra money,” says Frisse. “It was really a precursor to today’s risk assessment system.”

The board also chose to abandon assets that posed disproportionately high risk. A stand-alone church that had been insured in the 1840s, for example, did not have its policy renewed in the mid-1850s when an assessment revealed there was now a tannery adjacent to it. In the 1870s, Gore Mutual withdrew from London, Ont. after a slew of arson-related fires.

“They were practicing customer segmentation and risk management, which we think of as a new approach,” says Frisse. “But it tells us a lot about the sophistication of their thinking.”

By the 1860s, retroactive claims were stunting growth for the entire industry. Insurance mutuals were short of cash, many were bankrupted. Gore Mutual often relied on bank loans to cover losses.

“Board members loaned their personal money to the company,” says Frisse. “These loans stayed open for several years, which is an expression of their commitment to the company. But the lack of cash also made them vulnerable.”

Gore began to lobby for changes to the Insurance Act, to allow for the creation of cash mutuals.

“They went to the legislature a number of times—in fact, Gore was one of the key driving forces behind this,” says Frisse. “It was something the industry was pushing for across the board, but Gore was already one of the oldest mutuals in the province. They knew that without changing the structures, as the company continued to grow, there would be a need for a steady cash influx. The cash mutual model was seen as the most successful and promising way to do that.”

In 1868—a year after Confederation—the provincial legislature altered the act to allow for the creation of cash mutual insurance companies, a model that still exists today.

“In 1871, three years after the legislation came through, the company had 3,092 policies in force, insuring over $2.8 million with the average risk insured at $933,” says Frisse. “In the annual report for the following year, they note that ‘while the receipts from cash premiums have largely aided in paying losses promptly it is gratifying to be enabled to record the fact that the premium note capital of the company also exhibits a very material increase.’ ”

Riding the Rails

With its cash flow secure and the political landscape stabilizing, the company experienced growth in the early 1870s. The expansion of the railroad allowed Gore to expand its territory.

“It was the perspective of the directors after a few years, however, that the company had expanded too far and too quickly,” says Frisse.

By 1875 the board expressed concern about the number of fire losses in rural areas and decided that “out-of-the-way points, which cannot be conveniently reached by railway, be given up as far as practicable.”

“The board took the decision, that going forward, when they created new agent territories, they would have to be defined in direct relation to the railway, no greater than 10 miles north and 10 miles south of the railway,” explains Frisse.

Its nineteenth century risk management approach to catastrophic claims, allowed Gore Mutual to head into the next century in a solid financial position. The company felt little interruption, even in the face of major world turmoil.

“There was a lot of financial stability and considerable resources in the company,” explains Frisse. “The careful approach they took in the 1800s, not overexpanding, meant they were able to invest a lot in the community and into the company.”

In the First World War, Gore Mutual donated $50,000 to the Patriotic Fund, the company’s entire profits of 1915. In the Second World War, similarly, members pledged $100,000 to the war effort out of the company’s surplus in 1941 and voted to “donate a portion of their monthly salaries.”

“By the 1930s, Gore was a century old, and even the Great Depression would not affect the company significantly,” says Frisse.

Quite the opposite. Gore Mutual’s current headquarters was commissioned in the 1930s as a Depression-era make-work project. In 1937, the company was legally incorporated as a national company to allow for its next wave of expansion west, into Manitoba, Saskatchewan, Alberta and British Columbia. It also began to diversify into new categories: specifically, the automotive industry.

“It was due to its longevity and good balance sheet that Gore was able to be on the cutting edge of this new market in the midst of the Depression,” says Frisse. It was also able to focus on entrenching its financial support for the communities where it was operating.

Even today, the Gore Mutual Insurance Company Foundation, established in 2002, donates an average of $500,000 to community charities across the country.

Gore Today

One hundred and seventy-five years after that meeting in the Brantford schoolhouse, Gore Mutual continues to grow. It’s four times larger today than it was 15 years ago and remains one of the top 30 P&C insurers in Canada.

“We are carrying on with the legacy of our founders,” says McNeil. “We manage the business conservatively, which allows us to have the room to constantly search for ways to innovate. Unlike public companies, we’re not pressured to have a good quarter or else, so that allows us to take a longer view.”

McNeil says understanding the company’s history offers a mandate that has nothing to do with dollars and cents.

“It’s the values on which we were founded, that we can provide mutual benefit and support to provide greater security and safety for everyone in the community,” says McNeil. “The message from our history—the legacy—is that an insurance provider can transcend that role and develop an institution with meaningful roots in the community.”